Note 8 – Net Income Per Common Share

The Company determines basic earnings per share by dividing net income less preferred stock dividends by the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined by dividing net income less dividends on convertible preferred stock plus interest on convertible subordinated debt by the weighted average number of shares outstanding increased by both the number of shares that would be issued assuming the exercise of stock options or restricted stock unit awards under the Company’s 2003 and 2013 Stock Incentive Plans and the conversion of preferred stock and subordinated debt if dilutive.



	Three Months Ended March 31,
(Dollars in thousands except shares and per share data)	2018		2017
Numerator for basic earnings per share:
Net income	$	2,594	$	1,574
Less: Dividends on preferred stock	121		129
Net income available to common shareholders - basic	$	2,473	$	1,445

Numerator for diluted earnings per share:
Net income available to common shareholders - basic	$	2,473	$	1,445
Add: Interest on subordinated debt (tax effected)	404		—
Net income available to common shareholders - diluted	$	2,877	$	1,445

Denominator:
Total average shares outstanding	10,474,138		9,996,544
Effect of dilutive convertible subordinated debt	1,837,500		—
Effect of dilutive stock options and restrictive stock units	402,715		12,797
Total diluted average shares outstanding	12,714,353		10,009,341

Earnings per share - basic	$	0.24	$	0.14
Earnings per share - diluted	$	0.23	$	0.14

For the three months ended March 31, 2018 and 2017, approximately 490 thousand and 2.3 million, respectively, of options to purchase shares of common stock were not included in the computation of diluted earnings per share because the effect would be antidilutive.

For the three months ended March 31, 2018, approximately 3 thousand shares of restricted stock units were not included in the computation of diluted earnings per share because the effect would be antidilutive.